An initial coin offering (ICO) is the cryptocurrency industry’s equivalent to an initial public offering (IPO). A company looking to raise money to create a new coin, app, or service launches an ICO as a way to raise funds.
Most ICO’s have a bonus system to reward early investors. The bonuses can range from between 10% – 100% depending on certain ICOs, where early investors will receive additional tokens for their contributions. Some ICO’s even have a presale stage (or pre-ICO) that allows the public to invest before the ICO dates.
An ICO Brings New Cryptocurrencies to Market but Is Risky.
If there’s been one word on the lips of everyone in finance, it’s cryptocurrency. If you’ve been kicking yourself for not getting in on the ground floor of blockbuster coins like Bitcoin and Ethereum, you might want to consider looking into investing in an initial coin offering (ICO). Be warned, however: ICOs are highly risky even under the best of circumstances and have a high potential for scams.
Entrepreneurs looking to launch a new cryptocurrency can do it through an initial coin offering (ICO), a variation on an initial public offering (IPO). There is little to no government regulation of ICOs currently, and anyone can launch one, provided they get the technology put in place. How? Create a white paper or other document outlining the system, make a website or app describing how it works, and seek funding. Advertising is key since there are so many competing coins on the market, so figuring out how to appeal to the target demo is crucial. Not looking to launch a new coin, but rather, to invest in a new coin? Make sure to do thorough research, as there are a number of scams.
So What Exactly Is an ICO, Anyway?
Imagine this: You’re a Silicon Valley startup with a great idea for a new cryptocurrency system. Perhaps you want to streamline the Parent/Babysitter payment system so that it can be digital and encrypted. What a great idea! Let’s call it BabyCoin. The only problem is you need people to give you money so you can actually make the currency. Now, you could go to a bank or try getting venture capitalist investors, but what if you could raise money without having to give up any of your ownership of the company? Enter ICO.
Here’s how it works. You create a document essentially detailing exactly how the system would work (usually called a white paper), make a pretty website, and explain why it’s a great idea that could be very useful. Then, you ask for people to send you money (usually Bitcoin or Ether, but you can also take fiat) and in return, you send them back some BabyCoin. They hope that BabyCoin will get used a lot and be in high circulation, which would raise the value of the currency.
It’s important to note that, unlike an initial public offering (IPO), investing in an ICO won’t result in you having an ownership stake of the company you’re giving money to. You’re gambling that the currently worthless currency you pay for now will increase in worth later and make you money.
How to buy tokens during an ICO
Register for an ICO through the project’s website. …
Get Bitcoin or Ether. …
Move your Bitcoins or Ether to a wallet you control. …
Buy ICO tokens. …
Participate in an ICO by sending your crypto to their address. …
You get ICO tokens to your address.
How does an ICO make money?
In the case of an ICO, there are no shares per se. Instead, companies raising funds via ICO provide a blockchain equivalent to a share—a cryptocurrency token. In most cases, investors pay in a popular existing token—like bitcoin or ethereum—and receive a commensurate number of new tokens in exchange.